Insourcing vs. Outsourcing Group 1 ::: Operations Unlimited

Abdulla Mohamed BaKhamis

Kindra Funch

Victoria Marscher

Jason McCook

Jazmin Ortega

Supply Chain Management 304 – John Wu

InsourcingWhat is it?

How does it work?

Why it’s used?

What is it?

• Insourcing is a business practice in which work that would otherwise have been contracted out is performed in house. 

• Insourcing is also defined as bringing a third party outsourcer to work inside a company's facility.

• Insourcing can be viewed as outsourcing as seen from the opposite side.

How does it work?

• Insourcing often involves bringing in specialists to fill temporary needs or training existing personnel to perform tasks that would otherwise have been outsourced.

• An example is the use of in-house engineers to write technical manuals for equipment they have designed, rather than sending the work to an outside technical writing firm.

Why it’s used?

• Insourcing is a business decision that is often made to maintain control of critical production or competencies.

• Insourcing is widely used in production to reduce costs of taxes, labor and transportation.

Onshoring/Offshoring/Nearshoring

• Insourcing is often confused with onshoring, which is a company's decision to bring jobs back from overseas, or backsourcing, which is when a company decides to conduct all their jobs in-house.

• Insourcing delegates certain work to a different company, which may come from a different country in the case of onshoring, or from a different continent in the case of offshoring.

Insourcing

Pros & Cons

Pros of Insourcing

• Employees will know the company personally. Employees will be familiar with the companies missions and values, what the companies goals are. This will allow them to make better business decisions at will help the company reach their long-term or even short-term goals.

• Employees will be more accessible to management. Allowing for easier lines of communication. Communication would be far easier, more clear and efficient, primarily because the employee is within the company and doing the work alongside the other employees.

Cons of Insourcing

• Insourcing could cost more for the company to hire new employees and train them, offer benefits, and insurance. Putting the company at a much higher annual expense cost than contracting with an outsourcing agency.

• If employees were to leave, this could leave the company frantically trying to find a replacement employee. Whether that is a temporary person, or finding a new qualified worker, or even training a internal employee for the job.

• Insourcing could lead the company delegating multiple tasks to an employee. This could lead to confusion and the tasks not being done at the highest potential.

Outsourcing What is it?

How you ask?

What is it?

• The process of having suppliers provide goods and services that were previously provided internally.

• An Example: Dell buying some of its computer components from another manufacturer in order to save on production costs.

How you ask?

• By hiring another individual or company, either domestically or internationally, to handle business activities for you

Both small and large companies are turning to outsourcing as a way to grow while still saving money.

Offshore Outsourcing

• Offshore outsourcing is a method of hiring an organization to produce the goods you many need, in a country other than where the products or services are actually developed.

• It’s easy to understand why outsourcing has become such a trend. Companies are able to save money on the production of certain items, items they once had to make on their own.

• Now they are simply handing the task to someone with more knowledge, along with the right materials and machinery to build and or create these goods.

Outsourcing

Pros & Cons

Pros of Outsourcing

• Outsourcing can be a cost saving effect to a company. • Ex: off-shoring to a foreign country can save in labor cost due to the fact that

they are able to pay the employees much less.

• Outsourcing helps a company to not deal with staffing issues that the third party may have. • Ex: firing, hiring, and scheduling.

• most third party services specialize in the service they provide, by outsourcing, they would be able to provide better business that guarantees the customer to be satisfied and would give a better service than an in-house employee.

Cons of Outsourcing

• Linguistic barriers is a disadvantage a company may have. Lack of proper communication may affect business in the company.

• Outsourcing reduces employment where the product or service is produced.• Ex: Off-shoring to a foreign country takes away jobs to the company’s

domestic area.

• Company knowledge is can potentially be compromised due to the lack of information the third party may not have about the company.

Conclusion Insourcing : Outsourcing : Onshoring :

Offshoring : Nearshoring

Conclusion

• To be able to cut on costs of production, companies may hire external labor, consultancy or specialized services either from within the organization (Insourcing) or from outside the company (outsourcing).

• These approaches enhance profitability and productivity of the organization.

• Either way, these approaches has their pros and cons

• Sometimes companies may decide to bring back jobs back to the parent country (backshoring) or delegate some of its production overseas. Onshoring refers to cases where the parent company delegates part of its production to a neighboring country (such as US and Canada) or to a different country (Such as Toyota assembly lines in Kentucky).